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PSBs To Cultivate 'Champion Sectors' For Concentrated Lending Push

Updated: May 14, 2024 04:55:14pm

PSBs To Cultivate 'Champion Sectors' For Concentrated Lending Push

New Delhi, May 14 (KNN) India's Public Sector Banks (PSBs) are set to identify and concentrate efforts on one specialised “champion sector” each as part of their business plans until 2026-27, according to officials.

This strategic move aims to enable PSBs to expand their presence significantly in their chosen sectors by developing tailored capabilities.

The banks will design segment-specific lending products and build internal capacities such as stress testing models and early warning signal systems for these champion sectors.

“We are discussing these metrics with PSBs as part of their business roadmap till 2026-27,” said an official who preferred to remain anonymous.

This initiative falls under the 'Viksit Bharat' (Developed India) strategy for PSBs. It involves onboarding sector-specific advisors and developing credit underwriting models to expedite loan approvals in the identified champion sectors. The move complements the government's Production Linked Incentive (PLI) scheme, which seeks to bolster manufacturing prowess in select areas.

“Banks will focus on non-traditional sectors and collaborate to leverage the expertise developed among them,” another official stated.

In addition to the champion sector focus, PSBs' business plans encompass strategies to increase low-cost deposits, raise capital, resolve non-performing assets, enhance cybersecurity, and undertake financial inclusion drives.

These measures form part of the Enhanced Access and Service Excellence reform version 7.0, under which banks will be assessed on various parameters.

A bank executive, speaking anonymously, highlighted that improving credit flow to Small and Medium Enterprises (SMEs) will be another key area of focus this financial year.

“Lenders will use analytics-driven scorecards for faster loan sanctions, end-to-end automation and improved risk management,” the executive said, adding that PSBs will aim to retain existing customers while acquiring new ones.

While most PSBs reported profits in the last quarter of 2023-24, concerns persist that a moderation in credit growth may impact profit margins. Earlier this month, rating agency ICRA revised its outlook for the Indian banking sector fr0m 'positive' to 'stable', citing expected declines in credit growth and profitability due to narrowing interest margins. 

According to ICRA, a larger share of corporate advances enabled public sector banks to report better performance on loan slippages compared to their private sector counterparts, which have a sharper focus on retail and small business loans.

(KNN Bureau)


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